21st Century Fox holding talks to sell most of the company to Disney

access_time2017-11-08 07:56:36

21st Century Fox has been holding talks to sell most of the
company to Walt Disney Co., leaving behind a media company tightly focused
on news and sports, according to people familiar with the situation.

The talks have taken place
over the last few weeks and there is no certainty they will lead to a deal. The
two sides are not currently talking at this very moment, but given the on
again, off again nature of the talks, they could be revisited.

For Fox, the willingness to
engage in sale talks with Disney stems from a growing belief among its senior
management that scale in media is of immediate importance and there is not a
path to gain that scale in entertainment through acquisition. The company is
said to believe that a more tightly focused group of properties around news and
sports could compete more effectively in the current marketplace.

The media landscape has
changed considerably in recent years with giants such as Facebook, Google (Alphabet), Amazon and Netflix changing the way people consume media and
dominating the digital distribution of digital video content. Being able to
compete in that changing landscape, many people believe, requires scale that a
Disney has, but 21st Century Fox does not.

For Disney, the opportunity to
take control of another movie studio and significant TV production assets as it
readies a direct-to-consumer entertainment streaming offering is attractive as
is Fox's significant exposure to international markets, such as the U.K.,
Germany and Italy — both through its networks and 39 percent ownership of Sky. Disney recently announced it will pull all of its movies from the Netflix platform and will establish two
direct-to-consumer offerings: one for sports and one including its key
franchises such as "Star Wars" and Marvel.

Disney would not purchase all
of Fox, according to people with knowledge of the talks.

The company could not own two
broadcast networks and would therefore not buy the Fox broadcast network. It
would not buy Fox's sports programming assets in the belief that combining them
with ESPN could be seen as anti-competitive from an antitrust standpoint and it
would not buy the Fox News or Business channel. Disney would also not purchase
Fox's local broadcasting affiliates, according to people familiar with the
negotiations.

In addition to the movie
studio, TV production and international assets such as Star and Sky, Disney
would also add entertainment networks such as FX and National Geographic.

The contemplated structure of
the deal or the price that has been discussed could not be learned. Given it
would involve the sale of many, but not all of Fox's properties, it's unclear
how Fox would mitigate potential tax consequences of a deal.